Costa Rica’s economy will shrink 3.6% in 2020 due to COVID-19, according to Central Bank

Costa Rica’s Gross Domestic Product (GDP) — that is, the total value of goods and services produced in a year — is expected to decrease by 3.6% due to the COVID-19 pandemic, but will recover 2.3% in 2021.

The figures were reported during a press conference Friday with the president of the Central Bank of Costa Rica (BCCR), Rodrigo Cubero.

All branches of economic activity will be hit by the crisis, but the biggest impact will be absorbed by the Hotels and Restaurants sector (-27.6%), BCCR forecasted.

The bank also anticipates a drop in exports (-5.3%) and in household consumption (-0.9%).

In 2021, the start of the economic recovery is expected, with an increase of 2.3% of GDP, led by the Financial Intermediation sector. However, these models were calculated with anticipation that health restrictions can begin to be lifted in mid-2020.

The presentation of the economic projections affected by the pandemic for the next two years included other figures:

• Costa Rica’s trading partners will see their economies decrease by 5.5% before partially recovering in 2021.
• Costa Rican can benefit from improvement in terms of trade, mainly due to the drop in fuel prices, which will not recover until 2021.
• Local demand for diesel will fall 10% and that of gasoline by 21.7%, according to the Costa Rican Oil Refinery, which will save $500 million this year.
• Inflation will remain low and stable, international reserves remain high and there is abundant liquidity in the Integrated Liquidity Market, but there are liquidity tensions in national and foreign currency that have motivated interventions by the BCCR.

BCCR also provided estimates regarding unemployment, which correlates with decreasing contributions to the cash-strapped Costa Rican Social Security Fund. Cubero said around 7,000 companies with 118,000 workers have already submitted requests to modify their employment contracts.

Cubero indicated the world is an “unprecedented economic crisis” that could particularly affect Latin America, echoing a statement from the International Monetary Fund.

A version of this story was originally published by Semanario Universidad on April 24, 2020. It was translated and republished with permission by The Tico Times. Read the original report at Semanario Universidad here.